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Home > Blog > Real Estate (Commercial And Residential) > How And When To Use A Post Occupancy Agreement In Your Closing

How And When To Use A Post Occupancy Agreement In Your Closing


With a traditional closing, a buyer buys a home and moves into it, and the seller is selling the home, and leaves it. At closing, door keys, garage door openers, and similar items will be exchanged, and the buyer can go straight from the closing to their new front door.

But sometimes, it doesn’t happen that way. Because sometimes, the seller can’t leave immediately. The seller may need time to move into a new home, or work or school year calendars or obligations for the family may make it impossible for the seller to move out on the day of closing. But the buyer really wants the property. Is there a solution?

Enter the Post Occupancy Agreement

There is-it’s called an occupancy agreement. This is an agreement where the seller sells the home at closing, as is supposed to happen, but then the seller remains in the home, essentially as a tenant of the new buyer. The parties will transform from buyer-seller, into landlord tenant, for an agreed upon amount of time.

As you can imagine, this does add to the paperwork at closing, and the terms that must be agreed to by the parties, as the parties are not done with each other after the closing, as they normally would be–the parties’ rights and obligations as a landlord and a tenant still need to be established. That includes things like security deposits, when the landlord can enter the property, and who will pay for routine maintenance on the property.

The Pros and Cons

For the buyer, there are some good things and bad things about a post occupancy agreement. The good part is that the buyer gets the property that he or she wants. Additionally, the buyer may get some extra income from the rent that the seller/now-tenant will be paying.

On the other hand, the buyer may not want to be a landlord, and may not know how to be a landlord. The buyer may not want the obligation of managing the seller/now-tenant’s rights, fixing things for the tenant, or dealing with potential problems (such as if the tenant doesn’t leave when he or she is supposed to under the post occupancy agreement).

Damage and Repairs

There is also the issue of damage; when you purchase a home, you do an inspection, and you know the condition of the home at the time of closing.

But what will the condition of the home be when the post-occupancy agreement expires, and the seller/now-tenant suddenly moves out? There must be some agreement on how damage to the property, or even wear and tear, will be handled.

One solution may be for both sides to deposit funds in escrow, as security for a “worst case scenario,” such as, for example, money in case an attorney needs to be retained to handle an eviction.

Be aware that some lenders require that property that is residential, stay that way–that means, the mortgage loan documents may prohibit any tenant from being in the property. This is something you should check before agreeing to a post occupancy agreement.

Do you need a real estate attorney for your closing? It’s always best to have one at your side.The Law Offices of Larry E. Bray is ready to help. Contact West Palm Beach real estate lawyer Larry E. Bray today to schedule a consultation.




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